Bidders expected to pay around 150p per share for Lloyd’s underwriter

Investment banks are looking to find other potential suitors for Heritage, the Lloyd’s underwriter, following Ironshore’s rejected bid approach earlier this week.

Ironshore was said to have offered around 135p per share in its initial approach, which was rejected by the Heritage board as a “significant undervaluation”.

Market sources predict Ironshore to return with a higher offer. Bidders will have to pay around 150p per share, according to experts.

A senior market source said that other companies would be “running their measuring tapes” over Heritage, although no other bid candidates have yet been confirmed.

The source said: “Heritage has always been a trade sale waiting to happen. All the investment banks are rushing round to stimulate this.”

Two of Ironshore’s directors have links with Heritage and the Lloyd’s market. President and chief underwriting officer Les Rock was previously a lead underwriter at Heritage for Syndicate 1200 – a syndicate he founded.

Rock also served on the Heritage board, while chief executive Bob Deutsch currently sits on Chaucer’s board.

In January, Deutsch had hinted at an expansion into Lloyd’s. He said: “Doing business out of Lloyd’s has numerous advantages. There is a flow of business that goes through London that we don’t see in Bermuda.”

Bermuda insurers have spare cash following two years of strong underwriting results, and are looking to expand into the London market – which could fuel renewed merger and acquisition interest across the sector.

Analyst Numis, commenting on the interest in Heritage, pointed to the “attractive valuations” of smaller UK listed insurers, with “several of these now trading at a discount to their Bermuda counterparts for the first time in a while.”

Novae and Kiln were singled out for special mention.

Last week, before Heritage announced to the stock market that it had rejected an approach from an “undisclosed bidder”, shares were valued at 109.5p. As Insurance Times went to press, shares had climbed to 127p.

Atrium and Talbot were bought by Bermuda insurers earlier this year.p.

Atrium and Talbot were bought by Bermudans earlier this year.